Scholastic Sets Sites on eToys

Scholastic Corp. revealed plans to enter the e-commerce arena Monday when it
made a winning bid to acquire the assets of now-defunct eToys.

The children’s book publisher bid 30 cents on the dollar — estimated to
total $8 million — to acquire such products as toys, books, videos and
software. The bid, however, is conditional upon winning a second auction for
all the shares in eToys, which filed Chapter 11 earlier this month.

The ultimate plan for Scholastic is to supplement its current Web site with accelerated technology
and targeted ecommerce offerings, according to a spokeswoman for Scholastic
Corp.

“The parent site has always been targeted to learning and addresses
parents, teachers and children,” she said. “By acquiring eToys’ hardware and
software technology as well as its inventory we will benefit our target
audience. In addition to selling books and games designed for fun, we will
offer educational vehicles, such as workbooks and textbooks.”

The spokeswoman said she expects the bidding to conclude this week.

Scholastic was the highest of more than 30 bidders for the inventory,
according to the Wall Street Journal. However, the auction for the
shares is not assured for Scholastic as eToys could be sold off in pieces to
several bidders.

Buying the toy sellers’ shares could be a benefit, Paul Ritter, director of online retail strategies at YankeeGroup told internetnews.com. “eToys carries a good, positive image,” he said. “The company did a good job of branding and people enjoyed their commercials. There is value in that.”

Bidding on eToys’ assets is a good move for Scholastic, Ritter said. “It is easy to put a value on inventory purchase as opposed to intellectual property or a brand name,” he said. “This is a good way for Scholastic to lock in on some gross margins.”

At press time, Scholastic was trading at $40. The company has a
52-week high of $49, a 52-week low of $21.75.

Prior to filing for bankruptcy, eToys Once a Wall Street darling with a
market capitalization of about $10 billion, sold
its BabyCenter Inc.
to Johnson & Johnson for $10 million in cash.

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